Correlation Between Calfrac Well and Forum Energy

Can any of the company-specific risk be diversified away by investing in both Calfrac Well and Forum Energy at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Calfrac Well and Forum Energy into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Calfrac Well Services and Forum Energy Metals, you can compare the effects of market volatilities on Calfrac Well and Forum Energy and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Calfrac Well with a short position of Forum Energy. Check out your portfolio center. Please also check ongoing floating volatility patterns of Calfrac Well and Forum Energy.

Diversification Opportunities for Calfrac Well and Forum Energy

0.32

Correlation Coefficient

Calfrac Well  Forum Energy

Weak diversification

The 3 months correlation between Calfrac and Forum is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Calfrac Well Services and Forum Energy Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Forum Energy Metals and Calfrac Well is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Calfrac Well Services are associated (or correlated) with Forum Energy. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Forum Energy Metals has no effect on the direction of Calfrac Well i.e., Calfrac Well and Forum Energy go up and down completely randomly.

Pair Corralation between Calfrac Well and Forum Energy

Assuming the 90 days trading horizon Calfrac Well Services is expected to under-perform the Forum Energy. But the stock apears to be less risky and, when comparing its historical volatility, Calfrac Well Services is 6.0 times less risky than Forum Energy. The stock trades about 0.0 of its potential returns per unit of risk. The Forum Energy Metals is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  7.00  in Forum Energy Metals on December 30, 2024 and sell it today you would lose (1.50) from holding Forum Energy Metals or give up 21.43% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Calfrac Well Services  vs.  Forum Energy Metals

Calfrac Well Services

Risk-Adjusted Performance

Very Weak

Over the last 90 days Calfrac Well Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Calfrac Well is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Forum Energy Metals

Risk-Adjusted Performance

Very Weak

Over the last 90 days Forum Energy Metals has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Forum Energy is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Calfrac Well and Forum Energy

The main advantage of trading using opposite Calfrac Well and Forum Energy positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Calfrac Well position performs unexpectedly, Forum Energy can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Forum Energy will offset losses from the drop in Forum Energy's long position.

The idea behind Calfrac Well Services and Forum Energy Metals pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..